Annual report pursuant to Section 13 and 15(d)

Note 7 - Stock-based Compensation

v3.7.0.1
Note 7 - Stock-based Compensation
12 Months Ended
Apr. 02, 2017
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note
7
Stoc
k-based Compensation
 
The Company has
two
incentive stock plans, the
2006
Omnibus Incentive Plan (the
“2006
Plan”) and the
2014
Omnibus Equity Compensation Plan (the
“2014
Plan”). As a result of the approval of the
2014
Plan by the Company’s stockholders at the Company’s
2014
annual meeting, grants
may
no
longer be issued under the
2006
Plan.
 
The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Company’s overall goal of increasing stockholder value. Awards granted under the
2014
Plan
may
be in the form of incentive stock options, non-qualified stock options, shares of restricted or unrestricted stock, stock units, stock appreciation rights, or other stock-based awards. Awards
may
be granted subject to the achievement of performance goals or other conditions, and certain awards
may
be payable in stock or cash, or a combination of the two. The
2014
Plan is administered by the Compensation Committee of the Board, which selects eligible employees, non-employee directors and other individuals to participate in the
2014
Plan and determines the type, amount, duration (such duration
not
to exceed a term of
ten
(
10
) years for grants of options) and other terms of individual awards. At
April 2, 2017,
814,000
shares of the Company’s common stock were available for future issuance under the
2014
Plan.
 
Stock-based compensation is calculated according to FASB ASC Topic
718,
Compensation – Stock Compensation
, which requires stock-based compensation to be accounted for using a fair-value-based measurement. The Company recorded
$604,000
and
$906,000
of stock-based compensation during fiscal years
2017
and
2016,
respectively. The Company records the compensation expense associated with stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals.
No
stock-based compensation costs were capitalized as part of the cost of an asset as of
April 2, 2017.
 
St
ock Options:
The following table represents stock option activity for fiscal years
2017
and
2016:
 
 
 
Fiscal Year Ended
 
 
Fiscal Year Ended
 
 
 
April 2, 2017
 
 
April 3, 2016
 
 
 
Weighted-
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
Average
   
Number of
   
Average
   
Number of
 
 
 
Exercise
   
Options
   
Exercise
   
Options
 
 
 
Price
   
Outstanding
   
Price
   
Outstanding
 
Outstanding at Beginning of Period
  $
7.64
     
305,000
    $
6.83
     
330,000
 
Granted
   
9.60
     
120,000
     
8.38
     
110,000
 
Exercised
   
7.67
     
(102,500
)    
6.27
     
(135,000
)
Outstanding at End of Period
   
8.35
     
322,500
     
7.64
     
305,000
 
Exercisable at End of Period
   
7.33
     
147,500
     
6.72
     
112,500
 
 
The total intrinsic value of the stock options exercised during fiscal years
2017
and
2016
was
$214,000
and
$300,000,
respectively. As of
April 2, 2017,
the intrinsic value of both the outstanding and exercisable stock options was
$137,000
.
 
The Company received
no
cash from the exercise of stock options during either fiscal year
2017
or
2016.
Upon the exercise of stock options, participants
may
choose to surrender to the Company those shares from the option exercise necessary to satisfy the exercise amount and their income tax withholding obligations that arise from the option exercise. The effect on the cash flow of the Company from these “cashless” option exercises is that the Company remits cash on behalf of the participant to satisfy his or her income tax withholding obligations. The Company used cash of
$75,000
and
$118,000
to remit the required income tax withholding amounts from “cashless” option exercises during fiscal years
2017
and
2016,
respectively.
 
To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value. The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options that were awarded to certain employees during fiscal years
2017
and
2016,
which options vest over a
two
-year period, assuming continued service.
 
 
 
2017
 
 
2016
 
Options issued
   
120,000
     
110,000
 
Grant date
   
June 8, 2016
     
June 12, 2015
 
Dividend yield
   
3.33
%    
3.82
%
Expected volatility
   
20.00
%    
20.00
%
Risk free interest rate
   
0.93
%    
1.12
%
Contractual term (years)
   
10.00
     
10.00
 
Expected term (years)
   
3.00
     
3.00
 
Forfeiture rate
   
5.00
%    
5.00
%
Exercise price (grant-date closing price) per option
  $
9.60
    $
8.38
 
Fair value per option
  $
0.94
    $
0.77
 
 
For the fiscal years ended
April 2, 2017
and
April 3, 2016,
the Company recognized compensation expense associated with stock options as follows (in thousands):
 
 
 
Fiscal Year Ended April 2, 2017
 
 
 
Cost of
   
Marketing &
 
 
 
 
 
 
 
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2015
  $
14
    $
12
    $
26
 
2016
   
23
     
19
     
42
 
2017
   
25
     
17
     
42
 
                         
Total stock option compensation
  $
62
    $
48
    $
110
 
 
 
 
Fiscal Year Ended April 3, 2016
 
 
 
Cost of
   
Marketing &
 
 
 
 
 
 
 
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2014
  $
7
    $
7
    $
14
 
2015
   
54
     
45
     
99
 
2016
   
17
     
14
     
31
 
                         
Total stock option compensation
  $
78
    $
66
    $
144
 
 
A summary of stock options outstanding and exercisable at
April 2, 2017
is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
Weighted-
 
 
Avg. Exercise
 
 
 
 
 
 
Avg. Exercise
 
 
 
 
 
Number
 
 
Avg. Remaining
 
 
Price of
 
 
Number
 
 
Price of
 
Exercise
 
 
of Options
 
 
Contractual
 
 
Options
 
 
of Options
 
 
Options
 
Price
 
 
Outstanding
 
 
Life in Years
 
 
Outstanding
 
 
Exercisable
 
 
Exercisable
 
$ 4.81      
5,000
     
4.19
    $
4.81
     
5,000
    $
4.81
 
$ 5.42      
20,000
     
5.20
    $
5.42
     
20,000
    $
5.42
 
$ 6.14      
20,000
     
6.20
    $
6.14
     
20,000
    $
6.14
 
$ 7.90      
67,500
     
7.21
    $
7.90
     
67,500
    $
7.90
 
$ 8.38      
90,000
     
8.19
    $
8.38
     
35,000
    $
8.38
 
$ 9.60      
120,000
     
9.18
    $
9.60
     
-
     
-
 
         
322,500
     
7.98
    $
8.35
     
147,500
    $
7.33
 
 
As of
April 2, 2017,
total unrecognized stock-option compensation costs amounted to
$80,000,
which will be recognized as the underlying stock options vest over a weighted-average period of
6.4
months. The amount of future stock-option compensation expense could be affected by any future stock option grants and by the separation from the Company of any employee or director who has stock options that are unvested as of such individual’s separation date.
 
Non-vested
Stock
Granted to Non-Employee Directors
:
The Board granted the following shares of non-vested stock to the Company’s non-employee directors:
 
Number
   
Fair Value
   
of Shares
   
per Share
 
Grant Date
28,000     $
10.08
 
August 10, 2016
28,000      
8.20
 
August 12, 2015
28,000      
7.97
 
August 11, 2014
28,000      
6.67
 
August 14, 2013
 
These shares vest over a
two
-year period, assuming continued service. The fair value of non-vested stock granted to the Company’s non-employee directors was based on the closing price of the Company’s common stock on the date of each grant.
 
In each of
August 2016
and
2015,
28,000
shares that had been granted to the Company’s non-employee directors vested, having an aggregate value of
$281,000
and
$226,000,
respectively.
 
Non-vested Stock Granted to Employees:
During the
three
-month period ended
June 27, 2010,
the Board awarded
345,000
shares of non-vested stock to certain employees in a series of grants, each of which will vest only if (i) the closing price of the Company’s common stock is at or above certain target levels for any
ten
trading days out of any period of
30
consecutive trading days and (ii) the respective employees remain employed through
July 29, 2015.
The Company, with the assistance of an independent
third
party, determined that the aggregate grant date fair value of the awards amounted to
$1.2
million.
 
With the closing price conditions having been met for these awards, the Board at various times approved the acceleration of the vesting of
105,000
shares from these grants. The vesting of these awards was accelerated in order to maximize the deductibility of the compensation expense associated with the grants by the Company for income tax purposes. On
July 29, 2015,
the remaining
240,000
of these shares vested, with such shares having an aggregate value of
$1.9
million. Each of the individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company remitted
$948,000
to the appropriate taxing authorities on behalf of such individuals.
 
Performance Bonus Plan:
     
The Company maintains a performance bonus plan for certain executive officers that provides for awards of cash or shares of common stock in the event that the aggregate average market value of the common stock during the relevant fiscal year, plus the amount of cash dividends paid in respect of the common stock during such period, increases.  These individuals
may
instead be awarded cash, if and to the extent that an insufficient number of shares of common stock are available for issuance from all shareholder-approved, equity-based plans or programs of the Company in effect. The performance bonus plan also imposes individual limits on awards and provides that shares of common stock that
may
be awarded will vest over a
two
-year period. Thus, compensation expense associated with performance bonus plan awards are recognized over a
three
-year period – the fiscal year in which the award is earned, plus the
two
-year vesting period.
 
In connection with the performance bonus plan, the Company granted shares of common stock and recognized or will recognize compensation expense as set forth below.
 
                   
Fair
                                         
Fiscal
         
Fiscal
   
Value
                                         
Year
 
Shares
   
Year
   
Per
   
Compensation expense recognized during fiscal year
 
Earned
 
Granted
   
Granted
   
Share
   
2014
   
2015
   
2016
   
2017
   
2018
 
2014
    188,232       2015     $ 5.650     $ 354,000     $ 354,000     $ 354,000     $ -     $ -  
2015
   
58,532
     
2016
     
7.180
     
-
     
140,000
     
140,000
     
140,000
     
-
 
2016
   
41,205
     
2017
     
7.865
     
-
     
-
     
108,000
     
108,000
     
108,000
 
 
The below table sets forth the vesting of shares issued in connection with the grants of shares set forth in the above table. Each of the individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares. The below table also sets forth the taxes remitted to the appropriate taxing authorities on behalf of such individuals.
 
Fiscal
         
Vesting of shares during fiscal 2016
   
Vesting of shares during fiscal 2017
 
Year
 
Shares
   
Shares
   
Aggregate
   
Taxes
   
Shares
   
Aggregate
   
Taxes
 
Granted
 
Granted
   
Vested
   
Value
   
Remitted
   
Vested
   
Value
   
Remitted
 
2015
   
188,232
     
188,532
    $
1,618,000
    $
789,000
     
-
    $
-
    $
-
 
2016
   
58,532
     
29,267
     
275,000
     
138,000
     
29,265
     
240,000
     
86,000
 
 
For the fiscal year ended
April 2, 2017,
the Company recognized compensation expense associated with non-vested stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
 
 
Fiscal Year Ended April 2, 2017
 
 
 
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2015
  $
-
    $
37
    $
37
 
2016
   
140
     
115
     
255
 
2017
   
108
     
94
     
202
 
                         
Total stock grant compensation
  $
248
    $
246
    $
494
 
 
For the fiscal year ended
April 3, 2016,
the Company recognized compensation expense associated with non-vested stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
 
 
Fiscal Year Ended April 3, 2016
 
 
 
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2011
  $
49
    $
-
    $
49
 
2014
   
-
     
31
     
31
 
2015
   
354
     
112
     
466
 
2016
   
140
     
76
     
216
 
                         
Total stock grant compensation
  $
543
    $
219
    $
762
 
 
As of
April 2, 2017,
total unrecognized compensation expense related to the Company’s non-vested stock grants was
$334,000,
which will be recognized over the remaining portion of the respective vesting periods associated with each block of grants, such grants having a weighted average vesting term of
7.1
months. The amount of future compensation expense related to non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has unvested grants as of such individual’s separation date.